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    Version B - TWSS Fast Food Case Study

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    n

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    Version B - TWSS Fast Food Case Study

    Uploaded by

    Donkey Donkey
    9 views3 pages
    n

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    Version B_TWSS Fast Food Case Study

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    n

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    9 views3 pages

    Version B - TWSS Fast Food Case Study

    Uploaded by

    Donkey Donkey
    n

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    www.thewallstreetschool.

    com
    Delhi | Gurgugram| Indore|Online
    [email protected]
    91-9953729651

    TWSS Eat Fresh (a Fast Food Chain) – Financial Feasibility


    Case Study

    Transaction Summary
    TWSS Eat Fresh (a Fast Food Chain) and MPT (Space Provider) are evaluating a proposal to open a fast
    food restaurant TWSS Eat Fresh , at Delhi International Airport. MPT will provide Space for the Restaurant
    and TWSS Eat Fresh will develop and manage the Restaurant. In consideration of Space, MPT has option
    of charging either fixed lease rentals for the Space or sharing of restaurant revenue. As a advisor to MPT,
    you need to find out best possible option for MPT to maximize its profit and also to keep project financially
    feasible for TWSS Eat Fresh . You are required to calculate:

    ▪ IRR from project for TWSS Eat Fresh


    ▪ IRR from project for MPT under both Fixed rental and Revenue sharing option
    ▪ Suggest the Maximum %age revenue or Fixed Rentals MPT can negotiate, keeping in mind that
    ✓ TWSS Eat Fresh Net profit margins from the sixth year of operation (i.e. Fiscal Year Ending
    31-March’20) should not be less than 10%
    ▪ Under which option, MPT will make maximum return if:
    ✓ The fixed lease rental to be charged by MPT can’t go beyond 2200/ sq. ft under any circumstances
    Assumptions:

    General Assumptions

    One Million 1,000,000


    One Year (days) 365

    Capex Assumptions

    Particulars Total Cost


    Construction Cost (all inclusive) 1,000,000
    Dining & Office Furniture 150,000
    Equipment & Machinery 500,000
    Electrical Cost 200,000
    Computers & IT Infrastructure 200,000

    Space Acquisition

    Space Requirement (Square Feet) 1,000

    Particulars Option 1 Option 2 Option 3


    Purchase Revenue Sharing Fixed Lease Rental
    Cost 30,000 20% 2,000
    Per Sq. feet %age of Revenue Per Sq. feet per Year
    www.thewallstreetschool.com
    Delhi | Gurgugram| Indore|Online
    [email protected]
    91-9953729651

    Phasing Plan

    Capex Timeline

    Particulars Days Start Date End Date


    Civil Construction 180 30-Sep-13 29-Mar-14
    Total Period Post Civil Construction
    for Furnishing, Fit out & Electricals 90 29-Mar-14 27-Jun-14
    Computer & IT Infrastructure 5 27-Jun-14 2-Jul-14
    Total Construction Period 275

    Particulars Measure Date


    COD Date 30-Sep-13
    Fiscal Year End Date 31-Mar-14
    Construction Period Days 275
    Construction Period Ends Date 2-Jul-14
    Commencement of Restaurant Operations Date 3-Jul-14
    End of First Fiscal Year Date 31-Mar-15

    Working Capital Assumptions

    Stock Days 15 Days


    Debtor days 0 Days
    Creditor days 15 Days
    Minimum Cash Balance 30 Days of Expense except COGS

    Project Financing

    Equity 100%
    Debt 0%

    Direct Cost and Revenue Assumptions

    Particulars Direct Cost (Per Unit) Sale Price Unit Sales Per
    per Unit Day
    (Price)
    Burgers
    Chicken Burger 20 80 60
    Chicken Cheese Burger 25 100 60
    Veg Burger 15 60 100
    Veg Cheese Burger 20 80 100

    Sandwiches
    Chicken Sandwich 20 80 50
    Egg Sandwich 20 80 50
    Veg Sandwich 15 60 50
    Club Sandwich 20 80 50

    French Fries 12 50 100

    Beverages
    Cold Coffee 15 50 80

    Espresso Coffee 12 30 80
    Soft Drinks (Large) 25 50 80
    Soft Drinks (Regular 250ml) 15 30 80
    Tea 5 15 80
    www.thewallstreetschool.com
    Delhi | Gurgugram| Indore|Online
    [email protected]
    91-9953729651

    Growth Up to 2 Years 30.0%


    Growth 3 to 5 Years 10.0%
    Post 5 Year growth 5.0%

    Price and Cost Escalation (per year) 5%

    Operating Cost Assumptions

    Operating Expenses (as % of Total Revenues)


    Staff Salaries 10%
    Utilities (Electricity, Water, and Gas) 10%
    Incentives 2.5%
    Administration and General 5%
    Management Fee 1,200,000
    Promotional and Marketing Expenses 5%

    Income Tax Rate 32.45%

    Rate of Depreciation and Other Assumptions

    Particulars Depreciation Rate


    Civil Construction 10%
    Interiors/Fit and Electricals 10%
    Computers 60%

    Cost of Capital / Minimum Required


    Return 18.0%
    Long Term Growth 5.0%

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